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*Both the future expenses and future income totals are expressed as the amount of cash required today, invested at your expected rate of return, to equal the total future cash flow. For example, if you are expecting to receive $1,000 in exactly one year, that $1,000 has the same value as $909 today invested at 10%. Our totals show these current amounts to calculate the life insurance you require today to cover your future expenses after your future income is taken into account.

Definitions

Current life insurance coverage

Total amount of life insurance coverage you currently have for yourself.

Years for insurance income to last

Number of years your spouse will need to use your insurance proceeds to provide for living expenses and income.

Inflation rate

What you expect for the average long-term inflation rate. A common measure of inflation in the U.S. is the Consumer Price Index (CPI), which has a long-term average of 3.1% annually, from 1925 through 2008. The CPI for 2008 was 4.0%, as reported by the Minneapolis Federal Reserve. Your total expenses are increased by this rate for each year you require income. The income you would receive from your life insurance policy is used to cover any shortfalls between your expected income from all sources and your expenses.

Return on investments

The annual rate of return for your investments. The actual rate of return is largely dependent on the type of investments you select. The actual rate of return is largely dependent on the type of investments you select. From January 1970 to December 2008, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 9.7% (source: www.standardandpoors.com). During this period, the highest 12-month return was 61%, from June 1982 through June 1983. The lowest 12-month return was -39%, which happened twice, once from September 1973 to September 1974 and again from November 2007 to November 2008. Savings accounts at a bank may pay as little as 1% or less but carry significantly lower risk of loss of principal balances.

It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.

Insurance products may additionally include mortality, expense risk charges, cost of insurance, administrative, and surrender charges that will have a significant impact on the total rate of return for the investment.

Income tax

This is your income tax rate. Changing this rate only affects your interest income from your investments. All other income and expenses should be entered on an after tax basis.

Cash and savings

Total you have in cash, checking accounts, savings accounts or other accounts that can be used to help cover expenses.

Home equity

Total amount of equity in your home that you are willing to use toward your living expenses. Only include the home equity that you consider available to use toward your living expenses. For example, the equity you would make available by selling your home and moving into a smaller one.

Investments

Total value of all investments that you are willing to use toward your living expenses.

Other

Any other assets that you may be willing to sell or liquidate.

Estate or inheritance taxes on assets

Taxes that are required to be paid on your assets at death.

Probate costs

Probate costs cover a state's legal fees for disbursing the assets of the deceased. You may incur significant probate costs, depending on your state of residence, even if you have a will.

Funeral costs

All costs required to cover the cost of the funeral.

Uninsured medical costs

Any medical costs that are not covered by your medical insurance. Make sure to include any deductibles.

Debt repayment

Credit card debt, auto loans, home equity loans, mortgages or other debt that you wish to repay. Providing the ability to repay these loans if you were to die can significantly help your family meet its monthly living expenses.

Other expenses

Any other items that you need to pay with your insurance proceeds.

College fund for children

Amounts you wish to provide your surviving children to cover future college expenses.

Spouse income from work

Income expected from your spouse after your death. If your spouse needs education or retraining, make sure that the starting year for this income provides adequate time to complete.

Social security survivor benefits

Depending on your work history, your family may qualify for Social Security benefits. Typically Social Security benefits for the Widow/Widower cease when the youngest child turns 16. The child's benefit generally continues to age 18. Once the children are gone, Social Security benefits are generally not available until the Widow/Widower turns age 60.

Living expenses with children at home

Total monthly expenses while your children are living at home. This should include all monthly expenses except child care.

Living expenses with children gone

Total monthly expenses after your children have left home. This should include all monthly expenses.

Children's education expenses

Monthly expenses for your children's education expenses. If your children have not yet entered college, and have no other educational expenses, leave this amount at zero and enter an amount in the college fund entry fields in the total expenses at death section.

Retraining and education for spouse

Monthly expenses expected to cover any cost of education or retraining for your spouse to re-enter the workforce.

Other expenses

Any other monthly expenses not included above.

Savings balance

The amount of funds available to your family after your expenses at death have been covered. This includes any current life insurance.

How much life insurance do you need?

This Financial Calculator requires SUN's Java™ Plug-in. If you see this message you will need to download SUN's Java™ Plug-in. This can be done automatically by clicking the yellow bar at the top of your browser and choosing “Install ActiveX Control”.

Definitions